False Claims Act Civil Penalties to Rise?

The “Bipartisan Budget Act of 2015” recently passed by congress, could cause civil penalties under the False Claims Act (FCA) to rise. In 1986, with the enactment of watershed amendments, FCA statutory penalties increased from $2,000 to between $5,000 and $10,000. In 1999, to adjust for inflation, FCA penalties were increased to their present amount of between $5,500 and $11,000.

A section of the Bipartisan Budget Act of 2015, requires federal agencies to increase the amount of their civil penalties to adjust for inflation. These increases would be implemented pursuant to an agency’s rulemaking authority, and must occur no later than August 1, 2016.

Moreover, after the initial adjustment, the Bipartisan Budget Act of 2015 provides for further, automatic annual adjustments without any agency assessment of the need for an increase. This annual adjustment provision raises the potential for an Administrative Procedure Act challenge, and like the underlying amendment itself, seems ill-considered (at least as applied to civil fraud statutes and especially the FCA).

The increase in civil penalties is a big win for whistleblowers, the government, and taxpayers. The civil penalties provision of the False Claims act is a powerful weapon wielded by whistleblowers and the government as they seek to recover funds fraudulently obtained from states and the federal government. In many cases, the civil penalties under the False Claims Act are greater than the actual damages sustained by the government. Through these severe penalty provisions, the government is able to negotiate settlements with wrongdoers, rather than waste resources litigating FCA cases in court. And in many cases, the wrongdoer has more resources to devote to defending a whistleblower lawsuit than the federal government.

Some in the health care community have criticized the increase in civil penalties. In addition, their attorneys have stated that possible constitutional challenges could result from the increase. The basis of the constitutional challenge would be that because in many cases the civil penalties are greater than the damage done to the government, imposing such high penalties would violate the Eighth Amendment’s Excessive Fines provision. (the Eighth Amendment states “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”).

Despite the critism and legal objections, the increase in penalties is a good thing. Indeed, companies operating their businesses legitimately have nothing to fear. It is only those who seek to circumvent the government’s laws that should worry about the increase in fees. As the old saying goes “if you play with fire, you’re going to get burned.” And clearly, the government means it.

No Fees Without Recovery

Ross M. Wolfe and the Weiser Law Firm litigate whistleblower lawsuits on a contingent fee basis, so whistleblowers do not pay attorneys’ fees or court costs unless there is a recovery.

Please contact Ross M. Wolfe if you would like to speak with a whistleblower attorney for more information about fraud in government contracts or to schedule a free consultation to confidentially discuss your potential case.